IAG (ASX:IAG) Announces Strategic Alliance with RAC of Western Australia
Transaction Details
IAG will purchase RAC Insurance (RACI) business for $400 million and enter a 20-year exclusive distribution agreement with RAC, valued at $950 million. The transaction is expected to complete in the first half of 2026, subject to regulatory approvals. Upon completion, RACI’s portfolio will add approximately $1.5 billion to IAG’s Gross Written Premium.
Financial Impact
The alliance is projected to generate mid-single digit earnings per share (EPS) accretion and approximately $100 million pre-tax annual synergies. The transaction is funded through IAG’s existing surplus capital, debt, and organic capital generation. It aligns with IAG’s target of a 15% insurance margin and upgrades the return on equity (ROE) target to 15%.
Executive Comments
RAC Group CEO Rob Slocombe stated, “RAC is pleased to partner with IAG, a leading Australian general insurance company, in a long-term partnership that will strengthen the value we deliver to our 1.3 million members across Western Australia. IAG brings national scale, global reinsurance capability and industry-leading technology to support RAC members, along with a deep understanding of member focused organisations. The partnership will contribute to our organisation’s purpose, vision and mission of being the driving force for a better Western Australia, providing a safer, sustainable and connected future. The partnership will support RAC to deliver for our members, employees, and all Western Australians through continued access to innovative insurance products and services provided locally under the RAC brand, to safeguard their future for years to come.”
IAG Managing Director and CEO Nick Hawkins said, “We’re excited to partner with RAC to help protect and serve more Western Australians. RAC is a highly trusted institution with a quality insurance business and strong member relationships. This partnership lays a solid foundation for continued commitment to Western Australia, the nation’s top performing economy.”
IAG CEO Retail Insurance Australia Julie Batch said, “We look forward to welcoming all RAC members and RACI employees, as we work together to provide Western Australians with high quality service and innovative insurance solutions for the future. Our partnership with RAC will help to increase our geographical diversification and provide the opportunity to offer leading products and services to RAC’s 1.3 million members.”
Motley Fool contributor Lianne Eastty has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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